Prepayment

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1. Banking.

The non-contractual early repayment by bank customers of, for example, fixed rate mortgages.


2. Accounting.

An amount paid in advance for a financial benefit, represented by an asset in the organisation's balance sheet.

It is a prepaid expense.


Example: Venue hire

We book a venue for a function.

And pay 50% of the hire fee in advance.


The 50% paid in advance is an ASSET for us.

We are going to enjoy the use of the venue in future, but it has already been paid for.

So the 50% already paid represents a future economic benefit.


See also